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Tag Archives: payroll tax cut extension

Yesterday the Daily Caller posted a summary of the payroll tax cut bill that recently caused so much hand wringing in Congress. The bill that was passed was pretty much what was suggested at the beginning of the negotiations (except for the two-month limit).

The Daily Caller reports:

—Retains through Feb. 29 the current 4.2 percent rate for Social Security payroll taxes paid by 160 million workers, instead of letting the rate rise to 6.2 percent on Jan. 1.

—Requires President Barack Obama to approve construction of the Keystone XL oil pipeline from Canada to Texas within 60 days unless he declares the project would not serve the national interest.

—Price tag of $33 billion. Paid for by increasing home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration by one-tenth of 1 percentage point. The fee is passed on to home buyers and will apply to many new purchases and refinancings starting Jan. 1. For a $200,000 mortgage, the fee increases a borrower’s cost by about $17 a month.

—Requires House and Senate leaders in both parties to name negotiators to work on a bill extending the payroll tax cut for a year, extend federal jobless benefits for the long-term unemployed and keep Medicare payments to doctors at their current level.

I guess I am wondering why we need a committee to extend the bill for a year. The gang of twelve didn’t work out too well, so why are we doing this again?

Charles Krauthammer posted an article today at National Review about the bill passed yesterday in Congress allowing a 60-day tax break for Americans. First of all, it is not a tax break–it is a raid on Social Security at a time when Social Security can least afford to be raided. Second of all, no sane government sets a two-month tax policy.

The Republicans had the right argument on principle–the tax cut needed to be for the full year, but they lost on the politics. The reason they lost on the politics is that most Americans were paying more attention to their Christmas shopping than to what was actually happening in Congress, and when the media (and the Democrats) told them that the Republicans were holding up their tax break, they believed it.

Dr. Krauthammer states:

To begin with, what even minimally rational government enacts payroll-tax relief for just two months? As a matter of practicality alone, it makes no sense. The National Payroll Reporting Consortium, representing those who process paychecks, said of the two-month extension passed by the Senate just days before the new year: “There is insufficient lead time to accommodate the proposal,” because “many payroll systems are not likely to be able to make such a substantial programming change before January or even February,” thereby “creat[ing] substantial problems, confusion and costs.”

He further states:

The House Republicans’ initial rejection of this two-month extension was therefore correct on principle and on policy. But this was absolutely the wrong place, the wrong time, to plant the flag. Once Senate Republicans overwhelmingly backed the temporary extension, that part of the fight was lost. Opposing it became kamikaze politics.

The responsibility for this debaucle ultimately rests with the American people (and the fact that the media was failing to report both sides of the story). If we have truly reached a point in our history when we are tired of politics as usual, then we need to be willing to do something about it. We need to pay enough attention so that politics cannot trump good policy. Until that happens, we will get more of the same.

For the moment I am going to ignore the fact that the currently debated tax cut is not a tax cut but a raid on Social Security. I am not even going to comment on the impracticality of a so-called tax cut that only lasts for two months. I am going to comment on another part of the bill that is being tossed around Congress as a political football.

Please understand, the current debate over the tax bill is worth more politically to President Obama than the bill would be if it were passed. The debate over this bill is the perfect opportunity for the Washington establishment to trash the Tea Party. There is also the problem that if the bill were passed, President Obama would have to approve the Keystone Pipeline or explain why he wasn’t approving it (as opposed to his current vote of ‘present’).

Ed Morrissey at Hot Air posted an article today about the Keystone Pipeline. Prime Minister Harper of Canada is getting rather tired of the dithering of the Obama Administration on the matter.

The article reports:

Canada could sell its oil to China and other overseas markets with or without approval of the Keystone XL oil pipeline in the United States, says Prime Minister Stephen Harper.

In a year-end television interview, Harper indicated he had doubts the $7-billion pipeline would receive political approval from U.S. President Barack Obama, and that Canada should be looking outside the United States for markets.

“I am very serious about selling our oil off this continent, selling our energy products off to Asia. I think we have to do that,” Harper said in the Monday interview with CTV National News.

Harper’s comments were released a day after the White House sent signals it might kill TransCanada’s oil sands pipeline if it is forced to make a decision on the project in 60 days, saying there wasn’t sufficient time to complete a new environmental review.

The Keystone Pipeline is needed–it would create jobs and put more of America’s oil supply in the hands of a country that actually likes us. With the Arab spring turning into the Muslim winter, we really need to think about where our energy comes from.

The article at Hot Air concludes:

Meanwhile, China is growing thirstier, and Canada grows impatient to sell its bountiful oil to someone who really wants it. Maybe everyone should concentrate on the real economic benefits of the Keystone XL pipeline instead of the illusory differences between a 2- and 12-month extension of a tax holiday that produced no economic stimulus at all over the past year.

The House of Representatives is right to demand a year-long extension of the so-called tax cut, but they are going to be thoroughly slammed in the political debate.

Tampa Bay Online is reporting today that the House of Representatives has voted 229-193 to reject the Senate’s proposal for a two-month extension of the payroll tax cut.

The article reports:

The House vote, 229-193, kicks the measure back to the Senate, where the bipartisan two-month measure passed on Saturday by a sweeping 89-10 vote. The Senate then promptly left Washington for the holidays. Senate Majority Leader Harry Reid, D-Nev., says he won’t allow bargaining until the House approves the Senate’s short-term measure.

OK. Let’s take a look at this. The Republicans in the Senate need to be taken to the woodshed on this one. First of all, a two-month extension of a tax policy is totally ridiculous. Companies need time to program their payroll software, they need some certainty in the future to allow them to plan expenses. The Republicans in the Senate fell right into the hands of the Democrat politicians on this one. Harry Reid left town in order to avoid negotiations. He knew that the House would reject this bill–this is the Democrat way of avoiding the Keystone Pipeline and blaming the Republicans for the middle class tax increase that is coming.

There will be no payroll tax cut extension. In itself, that is not horrible. (Don’t panic. I am not for higher taxes, I just don’t like the way this was done). The payroll tax cut comes out of the “Social Security Fund” (which is nonexistent)–not the general fund. The payroll tax cut ensures the demise of Social Security sooner rather than later. Raising taxes on millionaires, increasing the cost of mortgages, etc., has no impact on the money not collected because of the payroll tax cut–those things impace the general fund–not the social security fund.

Unfortunately, this battle is totally about politics and the American people are the losers. The correct answer to the entire situation would have been for Congress to pass a real budget–which it has not done for almost three years and proceed from there.

The Hill posted a fairly good summary of the budget deal reached in Congress that will prevent a government shutdown. The Congress has actually agreed on something. Now the bill goes back to the House of Representatives for final approval and the President has to approve it in order for it to become law.

The payroll tax cut was extended for two months. That means that we will have to sit through all the posturing and name calling again in about six to eight weeks. Yuck. The bill includes a provision to expedite the construction of the Keystone Pipeline. The bill does not extend some of the business tax breaks–this will not be good for the growth of the economy–there is no such thing as a corporate tax–all corporate taxes are paid by the consumer.

The Hill reports:

The bill now awaits approval next week by the House of Representatives. Senate aides expect House Speaker John Boehner (R-Ohio) to agree to the proposal but he will not do so formally until he has had a chance to consult with members of the House GOP caucus.

The thing to remember here is that all these last minute theatrics are caused by the fact that the Senate has not approved a budget since President Obama took office (even during the two years he controlled the House and the Senate), so there are no spending guidelines in place. What we need is for Congress to actually pass a budget that they will have to follow. That would help make Washington a saner place.